The largest US oil producers that President Donald Trump wants to see returning to Venezuela to revitalise its ailing energy sector face a tough choice.
Few executives will want to get on the wrong side of Trump, but any serious effort to help rebuild the South American country's long-neglected oil infrastructure will require tens of billions of dollars — as well as government guarantees. Venezuela may sit atop the world's biggest proven oil reserves, but firms will need to be persuaded that it is worth their time and effort to try to exploit them.
Oil producers will pledge at least $100bn to revive Venezuela's crippled oil sector, Trump said ahead of a meeting with top industry executives at the White House on 9 January. But capital discipline rules the boardroom these days when it comes to allocating resources, shareholders are in the driving seat, and the top oil companies have competing priorities in the coming years.
"They've got other options," says Abhi Rajendran at Rice University's Center for Energy studies. "There's going to have to be a lot of risk mitigation that Washington can provide for there to be a meaningful incentive to dive head deep into Venezuela." With oil prices languishing near a five-year low because of a supply glut, there is hardly a market signal to rush back, especially to a country where companies including ExxonMobil and ConocoPhillips are owed billions of dollars in arbitration claims after having their assets seized in 2007.
Immediate repairs to Venezuela's oil infrastructure could deliver a short-term production boost in the next year or so. The country's oil output has slumped to below 1mn b/d from over 3mn b/d in the early part of the 2000s. But anything beyond that would demand hefty investments and companies would need reassurances they were dealing with a stable regime in Venezuela, clarity around legal contracts as well as long-term support from Washington. "There are a lot of hurdles to clear before you can get super excited about investing in Venezuela, which would require a pretty large-scale investment," Rajendran says.
Chevron would have a head start over rivals if a major effort to revive Venezuela's oil industry becomes a reality. The second-biggest US oil company has maintained a continuous presence in Venezuela even after other major producers departed. It operates in the country with state-owned PdV under a special waiver from US sanctions and imported about 120,000 b/d of crude from Venezuela to the US in December, according to ship-tracking data from Kpler.
Big deal
Wider US oil industry enthusiasm about heading back to Venezuela has been mixed so far, Treasury secretary Scott Bessent said. "The big oil companies who move slowly, who have corporate boards are not interested," Bessent said on 8 January. The view is different among independent oil producers and wildcatters, who are eager to take part, he added.
But the prospect of tapping Venezuela's vast oil riches may yet prove tempting as companies seek out new opportunities to shore up their upstream portfolios for coming decades. "Venezuela's huge oil resource can play a part, even if the predominantly heavy crudes are at the other end of the spectrum from the advantaged barrels — low cost, low emissions and, in many cases, low risk — that are the primary focus of the industry going forward," argues energy consultancy Wood Mackenzie. Proximity to Gulf coast refineries may be an added bonus for US producers. But improved security will be a requirement before companies start deploying workers as well as a stable political and legislative framework. "Any new projects will also have to meet companies' strict economic screening criteria," Wood Mackenzie says.
